theor Andrei A on party Agrgas in yor Bair MANA ABSTRACTS Intermediate Financial Management FIN 362 Since 20% of your grade is based upon your written abstracts, it behooves you to understand what the minimum components are of this assignment. ABSTRACT – represents a brief statement of essential thoughts of an article; summary: Specially your abstract should have a maximum length of two (2) double-spaced type written pages and although you are not graded directly on your writing style, certainly the content of your paper (what you are graded on) is markedly improved by quality edited sentences. Consider the following components: A. Required Areas - Required in Your Abstract 1. Purpose of the Article 2. Scope of the Article 3. Classification of the Article 4. Findings or Inferences of the Article B Additional Areas to Consider for Discussion in Your Abstract 1. Potential Bias in the Article 2. Has This Article Generated Any Additional Articles By the Author or Other Authors on the Same or Similar topic. (This will obviously require you to conduct research) 3. Critically, yet based on specific rationale, identify the value of the article to financial managers based on your insight. FIN-362-B February 15, 2017 AN INTRODUCTION TO RISK AND RETURN CONCEPTS AND EVIDENCE, PART I Purpose of the article The purpose of this paper is to present a nontechnical introduction to modern portfolio theory. Therefore, the paper provides wild understanding of the foundations upon which the modern risk measures are based, by presenting the main elements of the theory along with the results of some of important empirical tests. Scope of the Article The article discusses procedures for measuring the systematic risk or "beta" factors for securities and portfolios. The nondiversifiable or systematic risk of portfolio is shown to be weighted average of the systematic risk fits component securities. Classification of the article: Empirical Finding: . Portfolio theory deals with the measurement of risk, and the relationship between risk and retum. the standard deviation of portfolio returns be used as a measure of total portfolio risk. . It is concerned with the implications for security prices of the portfolio decisions made by investors. If, for example, all investors select stocks to maximize expected return for individually acceptable levels of investment risk. . Measuring historical rates of return is a relatively straightforward matter. The return on our investor's portfolio during some interval is equal to the capital gains plus any distributions received on the portfolio To measure the average return over a series of measurement intervals, two calculations are commonly used: the "arithmetic average and the "geometric average retum. So the arithmetic return measures the average portfolio return realized during successive 1-year periods. Although the geometric average measures the true rate of return while the arithmetic average is simply an average of successive period returns. . A measure of risk is the extent to which the future portfolio values are likely to diverge from the expected or predicted value. More specifically, risk for most investors is related to the chance that future portfolio values will be less than expected. If an investor holds a portfolio of treasury bonds, he faces no uncertainty about monetary outcome. The value of the portfolio at maturity of the notes will be identical with the predicted value. The investor has bome no risk. However, if he has a portfolio composed of common stocks, will be impossible to exactly predict the value of the portfolio as of any future date. Empirical studies of realized rates of return on diversified portfolios show that skewness is not a significant problem. If the shapes of historical distributions are indicative of the shapes of future distributions, then it makes little difference whether we measure variability of returns on one or both sides of the expected return.
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